Nigeria Rising: The Woman Behind The Nation’s Economic Turnaround

Forbes: Leadership is often defined as a character. Can you share with us the story of how you saved your sister during the civil war, Biafran War, in the late 1960s.

Okonjo-Iweala: Well, thank you, Mr. Forbes. I think that’s a very personal and a very difficult story for me because it brings back really tough memories. You know but, during the war, which the Nigeria Biafra War, which was 1967 to 1970, my father was a brigadier in the Biafran army. My mother and I worked for a while, you know, in kitchens that prepared dry food packs for soldiers. You know, at a point in time we lost everything. We were running from place to place just like many people in Biafra at the time. And we ended up in a village called Isiekenesi on the Biafran side at that time. My father was in the army compound. We were, my mother was with us, alone. And she was very ill. And my sister was also very ill with terribly high temperature. And there was no doctor nearby.

Forbes: Your sister was only three.

Okonjo-Iweala: She was just three. And, you know, I was about 14, 15. And there was no doctor. It was clear she had malaria and if we didn’t get treatment my mother said she probably wouldn’t make it. And then we heard that about five or six kilometers away there was a physician who had come in somehow and was treating people in the surrounding villages. And my mother was ill, there was no one else, so I had to put her on my back and walk all that long distance to try and get to see this physician. But what it was, I remember walking, it was a very long walk and the sun was really hot. And I kept feeling that if I didn’t make it somehow, you know, my sister’s life was dependent on me.

So we made it to this center. It was actually in a church where this woman, you know, physician was seeing patients for free. You know, she was just doing this because there was no doctor for miles around. But there were what seemed to me like a thousand people just packed, jam-packed, around this church, all trying to get in with one ailment or the other.

And I looked. I didn’t know how I was going to get in. And I was crying, you know. And then I saw people crowding near the window because the door was absolutely, the church door was jam-packed. And there were windows. People were climbing in through the windows.

And I just thought to myself, “How will I do this?” And I said, “Well, they’re all trying to get in. If I just creep in through their legs and try to reach to the window, maybe I can get my sister in.” She was still strapped on my back.

So that’s what I, so I went on my knees and through people’s legs. And just crept up all the way up to the window. And then I took my sister off my back and, you know, thrust her in. You know, just over these people. And then I clambered in after her and I was crying all this while. It was really crazy.

But we got in. And, you know, the window, the doctor was standing right near that window. So when I threw my sister, they caught her. And she couldn’t believe, you know. So I was crying and I was saying, “My sister is ill.” She had temperature. I don’t know what it was but it was so bad. They gave her an injection right away, which must have been chloroquine, I figure now. And a few other things.

Forbes: Stop the dehydration.

Okonjo-Iweala: Yes.

Forbes: Yeah.

Okonjo-Iweala: And then I took her back and put her on my back. And I just walked all that way back. And I felt, you know, this feeling of, “My God, you know, if I hadn’t been able to do this I would have been responsible for the loss of life of my sister.” But what it taught me was figuring out strategies.

You know, that you can never give up. Cause when I looked at that crowd, I was just a small young girl. And what went through my mind is, “I’ll never get in.” But then I said, “No, I’ve got to get in.” So that’s a lesson I learned, that you must, however tough the situation, you must figure out a solution.

Forbes: Which gets to, you served one stint as Finance Minister after the military left in 2003. Went through three difficult years, we’ll discuss in a moment some of your achievements. And after, then you came back again. Why?

Okonjo-Iweala: That’s a very tough question, Steve. It really is a tough question. I came back because, actually, after I served the first time under President Obasanjo in his second term, the following president, who was President Yar’Adua, asked me to come back twice.

But I felt I had given my service. I went because I wanted to serve my country and give back. And I thought I’d had three tough years as Finance Minister and worked really hard and that was enough. So I said no. But then when President Jonathan came, he was really, really focused on trying to get me back.

And lined up all the reasons. And one of the things he said, he said, it’s not about me. You know, it’s about the country. I was really impressed with that. “It’s about you coming to help us with your skills. It’s about trying to right the finances and get us back on track.” Remember that this was after the financial crisis of 2008 to 2009. And the food crisis. There have been so many global crises. And Nigeria had money to survive but, you know, our finances were a bit tricky. And needed really strong action to get us back on the right path.

You know, so he made all these arguments and said, “Look, you need to come back again and give back. This is what it’s about.” And I, at some stage, it took almost a month as we had this conversation. And he never gave up. He just kept coming back.

I would say, “No, Mr. President,” and he would come back again. And, you know, after a while he convinced me that, “Look you need to bring whatever skills you have to bear back again to help correct things.” So that was why I went back. So it was just that spirit of love for country, trying to help where you have the expertise. You know, and I, not that you feel you’re the only one who can solve these problems. But when your president is repeatedly asking you over a period of time, it’s pretty difficult to say no.

Forbes: Any thoughts of 2015 or 2019?

Okonjo-Iweala: Oh, no. My only thoughts are finish this job and take a holiday.

Forbes: How strong is democracy now, would you say, in Nigeria. How deep are the roots now?

Okonjo-Iweala: I think we are still a young democracy. But, you know, it’s strengthening. But it’s brutal. I think it’s very early stages. You know now we have an opposition party?

Forbes: Which came together.

Okonjo-Iweala: Which is good.

Forbes: Yeah.

Okonjo-Iweala: Yeah. You know, some parties merged. And, you know, the ruling party PDP had a lot of almost all the big politicians. Some of them crossed over to the new party, the ACP. The APC, sorry. The APC. And I think now you have two big parties.

After all, a democracy’s about having a strong contender. So that’s fine. It means that Nigeria’s democracy’s deepening. But, you know, I think part of what we are going through now where you see a lot of negativism in our press day after day after day.

It’s sort of a Tea Party type approach. You know, they try to hold the budget up, you know, and block it from passage. And they’re learning tactics that, you know, may not move the country forward as much. But that’s okay, it’s all part of the game. And I think it’s okay. It’s okay to have a strong democracy going. So we need to just refine it a bit more. We need to learn in the democracy that you can, you know, two parties can criticize each other and government policies. But not pull the country down. We need to avoid that.

Forbes: Do you feel both parties know the importance of balancing north and south?

Okonjo-Iweala: Well, you know, I’m not a politician by training. You know, I came in as a technocratic person. So I don’t feel too qualified to answer all these questions. But since I’m in there as Finance Minister you can’t avoid politics.

Yeah, I think both parties know. I mean, you know, we have been balancing this north and south for a hundred years now. You know, we celebrated our centenary a few weeks ago where the north and south of Nigeria was amalgamated by the British January 1st, 1914. And, you know, we’ve been making it work.

And of course people are always quick to predict the demise of Nigeria. But Nigeria has been going on. And I think it will go on. All actors realize that we are better as a unified country. And, you know, there are so many interrelationships now between north and south. So many intermarriages. And so much going on that I think it will be difficult to separate it.

Forbes: In your first term as Finance Minister, you pulled off the feat of getting the debt sharply reduced I think from $30 billion in effect down to $12 billion. What were some of the other achievements?

Okonjo-Iweala: Well, thank you. I think the debt relief was a very big one. We actually had $35 billion external debt. You know, when we went in for this in 2004 to 2006. And we were able to negotiate with the Paris Club an extraordinary deal. The second largest deal they ever did, where we actually wiped out the $30 billion of debt, you know, through a combination of outright cancellation of $18 billion, a payment of arrears of $6 billion and a buyback. The first buyback that a developing country was ever allowed to do, where we got another 25% off of the remaining $6 billion. And that whole combination of instruments led to our wiping out $30 billion in debt. And so that was, that achievement, has given Nigeria unprecedented room for fiscal maneuver.

You know, because our debt to GDP ratio today is one of the lowest in the world at about 21%. The other achievements were quite a lot. We stabilized, one of the ones I’m most proud of as well, is that we had a very volatile economy.

You know, if you looked at the chart of our public expenditure and our revenues, it was a zigzag pattern. Because when oil revenues were high, we spent everything. And when they were low, we sometimes the country could not meet its bills.

And as a result, if you trace the pattern of GDP growth in all these years you’ll find the same volatile zigzag pattern. And no country can really grow with such a pattern. In fact, according to a World Bank study, we are losing three percentage points of GDP growth by not managing the volatility.

So one of the proudest achievements was working with the World Bank and the I.M.F. to develop an instrument, an oil price-based fiscal rule that is delinking the budget, the price of oil at which we budget from the swap market price.

And we were able to have a smoother public expenditure pattern, you know, that helped us manage the volatility. As a result of this, we had macroeconomic stability. The fiscal management was easier. And we coupled it with very good monetary policies, which enabled us to build a stable platform, which we have today, of macroeconomic management. Today we’ve continued the same policies. And I can tell you we have, you know, a benchmark price of $77.50 for oil at which we are budgeting. And, you know, we have 1.9% of GDP fiscal deficit, which is reasonably low.

We have inflation at 8% single digit, down from 12% a year ago. You know, as I said, our debt to GDP ratio is 21%. We have reserves of five months of imports, which is very healthy at about $39 billion, $40 billion. And a GDP growth rate 2013 6.2%. I.M.F. is forecasting 7.3% for 2014. It’s one of the ten fastest growing countries in the world.

And so these achievements that we made in those times built a platform upon which the economy can now develop. And you need that. We mustn’t forget that without macroeconomic stability you cannot really look to develop the sectors. And we’ve built that platform. So I’m quite proud of that.

Forbes: Can you quickly touch on what’s happened with pensions? And agriculture.

Okonjo-Iweala: Yes. So, on agriculture we have a very good story going. The president, President Goodluck Ebele Jonathan, is very keen on agriculture. And the Agriculture Minister, Dr. Adesina, working with the president and with the team has done a good job of really putting agriculture on a different level.

He sees it as agriculture as a business. So changing the mentality of our small farmers and changing the tools they have so that they see themselves as in a small business as opposed to in a development project, as he puts it. Change is really the optic. So it’s all about developing the value chain of agriculture. Starting from research to good seeds and inputs. You know, to improved production, to marketing, to transformation.

Forbes: Was it mainly educating farmers?

Okonjo-Iweala: In addition to that, making sure they get input sometime. You know, there was some fraud in the fertilizer scheme. Because you had middlemen.

Forbes: Right, subsidies, so-called subsidies.

Okonjo-Iweala: And the Minister of Agriculture worked on it and swept away, you know, this fraud. So that before 11% of farmers used to get improved seeds and fertilizer. Now 94% get it. And that has made a big impact on yields. So for the first time we produced 1.1 million metric tons of rice. You know, in 2012 dry season rice, which we’d never done in ten states in the north.

Forbes: Will you become self-sufficient next year?

Okonjo-Iweala: We are looking, well, I don’t know if we can make it, but we are shooting for 2015. But if not then, shortly thereafter because we’re doing really well. So that’s agriculture. And really we are focusing, Nigeria has strong comparative advantage.

We are creating thousands of jobs through agriculture and going into millions. And we are supporting young farmers. You know, some of them are going to get private equity invested in their businesses to take them to the next level.

We are focusing on certain crops. Rice, because we are the largest importer of rice in the world. We want to import substitute. Casaba, we are the largest producer of casaba. But we’ve never transformed it into any value. And now we’ve got Cargill and others coming in.

There are many companies investing who want to help us transform this into starch and other things. So the agriculture story is really a very good one. Our food import bill has dropped as a result of all this. And the other area you asked me about was…

Forbes: Pensions.

Okonjo-Iweala: Pensions. Well, on pensions, we also have a good story to tell. In the sense that we have two pension schemes. We have the new contributory pension scheme, which is going on very well. No problem. And we’ve saved about up to $15 billion in that now. And it’s going really strongly. But alongside that we have the remnants of the old defined benefit scheme. There’s still some people who are on this scheme because of the cut-off date.

Forbes: Now, is this financed by the 7.5% payroll tax? Or how is it financed?

Okonjo-Iweala: No, it’s financed off of the budget.

Forbes: Okay.

Okonjo-Iweala: Yeah. You know, and that is why we had to change it and put new entrants into the workforce on a contributory scheme because it’s not sustainable. But now that we’ve got the contributories in, the remnants we are still financing off the budget.

But the old scheme was very fragmented. You had immigration pensions, police pensions, civil service pensions. And they were all being managed in this fragmented manner. Which gave room for a lot of fraud and, you know, there was no biometric. So you had ghost pensioners.

And so, you know, the fraud in it, people were caught. Some civil servants, you know, who had dipped their hands and taken people’s pensions. And they’ve been prosecuted. Some of them are in jail, others are still being tried. But what we needed to do beyond punishing those people is to totally refine, restructure that scheme, you know, for the amount of time it will last. And we’ve done that now.

Under the law we created the Pensions Transition Department. And we put, we unified all these different schemes under it. We are conducting biometrics of pensioners so that people cannot enter ghost pensioners into the system. And, you know, we’ve put in place an institutional structure that will prevent fraud. And that’s what I’m quite proud of.

Forbes: You’ve said as a goal you’d like to see Nigeria by 2020 being among the top 20 economies in the world. Your former employer, the World Bank, comes out with a publication called Doing Business each year. And one of the ways to get away from the oil curse, obviously, is a vibrant small business sector.

Okonjo-Iweala: Mm-hmm.

Forbes: Is the government going to do anything to make it easier to set up a legal business? Nigeria ranks, I think, 122.

Okonjo-Iweala: Right.

Forbes: And clearly you need to get up with New Zealand to make it easy for people to get out of the informal economy into the formal one.

Okonjo-Iweala: No, absolutely. I think these are very pertinent observations. It’s been the aspiration of the country from one president, former President Obasanjo to President Yar’Adua to President Jonathan, that the country becomes one of the 20 largest by 2020.

You know, so, but to do that we have to do a lot of reforms. And I must say we have been doing. Our electricity power sector reforms have been praised as very transparent and unprecedented. We’ve privatized all our generation and distribution assets. We’ve only kept transmission in the hands of government.

We’ve liberalized the sector so that the likes of GE, AES and Siemens are investing in Nigeria. So that’s a big reform. We’ve done many reforms to ports, telecoms. However, we still need some microeconomic reforms in doing business. And that is absolutely true. I think we’ve made progress. We used to rank at about 137, if I remember. We’re now moved up. But still, we’re not in the neighborhood we want to be. You’re absolutely right. We need to move up. And therefore we need to look at issues like land and like land titling. Registering a business.

Forbes: Well, registering a property.

Okonjo-Iweala: Yeah, registering a property for example. Registering a business can now be done in 24 hours. This is now a reform that we’ve put in. You know, and we now have one-stop shops where you can come in and set up a business and do that.

You know, so we’re trying to decentralize them. And we have in Abuja and Lagos but we need to get into all the other cities but it’s doable. And, you know, we need to look at all the other micro blocks. Access to finance is one that is not very easy for an enterprise.

Forbes: One of the things that’s happened in Nigeria under your tutelage is reforming the banking industry.

Okonjo-Iweala: Mm-hm.

Forbes: More better capitalization, fewer institutions. Are the institutions rising up? Are these existing banks doing more to finance small businesses?

Okonjo-Iweala: Yeah, well, you know, actually, the consolidation of the banking sector and the strengthening and clean out of the banking sector during the financial crisis was done by two Central Bank governors. Not, not really by me.

It was Governor Soludo and Governor Sanusi. And, you know, they did a good job. And so what we have now is a banking sector with very few non-performing loans. Maybe about 5%, strong, we’re meeting the Basel requirements, a strong sector.

And so we’ve got a good, clean banking sector. However, you know, I feel that they really are not quite meeting the needs of small and medium enterprises yet. Even of large ones. You know, so we need to get the banking sector to finance the real sector much more. And part of it may be the fault of government ’cause, you know, it’s easy for them to invest in government treasuries and bonds.

It’s easier to do that than finance, run around looking for, you know, enterprises. But we are pulling back. We are reducing the amount of domestic borrowing which we are doing. You know, so that should have a critical impact on the banking sector to look for more clients. But we also need to strengthen our S.M.E. We got 32 million small and medium enterprises. We need to get technical assistance to some of these, you know, to bring them up to the next level. And we are doing.

We have a number of initiatives. I’m very proud of a program that the president, President Goodluck Ebele Jonathan, really supports very strongly. It’s called Youth Enterprise with Innovation. And this is one that helps young entrepreneurs, 18 to 40, to really strengthen their enterprise and through a business planning competition. We are doing it with the World Bank, the U.K. Department for International Development (DFID). And, you know, they get a grant of $10,000 to $90,000 if they win. And so far we’ve got 3,600 winners. It’s fantastic. They’ve created 27,000 jobs.

And we are targeting 80,000 to 100,000. So those kinds of approaches of helping these small enterprises, as you say, become more formal. We’ve got them in the tax net now. They are properly registered. We’ve also got them relationships with banks so that eventually they become good customers for these banks. They are getting support and T.A. So those are some of the things we are doing within the economy. And we hope the banking sector will follow us.

Forbes: One last thing on electricity. When I was last in Nigeria last summer, people like to say, “There must it’s a conspiracy.” Because the generator, people who sell generators, do a very good business because they can’t rely on the grid. And somebody said “The reason beer costs more in Nigeria than South Africa is the electricity, it hurts high-tech.” These electricity reforms, when do you think people in Nigeria will start to see a real difference in the availability and affordability of electricity?

Okonjo-Iweala: I just, I think that’s an excellent question. I mean, that’s the bottom line, isn’t it? I mean, you can do all the reform you want but it has to lead in the end to a longer supply of power for people. And I think that now in some cities we are seeing there 16 hours electricity supply up, but it’s uneven. You know, you don’t feel it everywhere. And I believe that we need, there must be, necessarily, a transition as the private sector takes over. You can’t expect that overnight once it acquires this asset. They have to invest in them.

But I can tell you that the Nigeria, the power sector in Nigeria, I would say two to three years from now is not going to be the same as what you see today. We’re experiencing some problems with gas supply. We have gas but we don’t have the pipelines. So there are people and private sector is also investing in that. And government is co-investing, you know, in order to hasten things.

I think when we get that going and all these assets are now being managed by private sector, I think you’re going to see a class shift. It’s like the telecoms. When they took over, the first two, three years was quite rough. You know, the price of telecommunications was high.

There were not as many phones. There were more than when we had only land lines. But not as many and they were quite, it was quite expensive. All of a sudden as these companies began to invest in more towers, you know, in better service, you just saw a huge explosion. And now nobody can even remember when Nigerians did not have access to a mobile phone. When young people could not access the internet and do all their business and send Twitter. And they can’t, nobody can remember.

I predict that we’ll go through another two to three rough years as these private sector people take hold of their businesses and make the necessary investment. And then I think five years from now people will be wondering, “Oh, what was this country like without electricity?”

Forbes: In closing, one of the challenges for Nigeria and Africa is the image of disease, war, corruption. Even in Africa people seem to go into it. How do you get the world to look at more things like Nollywood and some of the things that are happening that don’t get in the headlines? Is Nollywood gonna overtake Hollywood?

Okonjo-Iweala: I think so. I hope so. We need it to because we need to create the jobs. But, you know, you hit on another really important issue, which is the image and perception of disease, war. And Africa has changed. You know, there are two stories about Africa. And we need to get the story of the frontier markets, you know, the emerging market. You know, look, this continent has really in the last decade persistently grown at 5% and above compared to slow growth in the decades of the ’80s and ’90s. And, you know, it’s performed now better than the global average. And better than many countries, you know, across the world. So the continent has, and it’s not a fluke. It’s been consistent.

Forbes: It’s not just commodities.

Okonjo-Iweala: Over a decade. No, it’s not just commodities, either. If you break it down you see that many countries are growing based not on resource, natural resources. But on other sectors. Like Nigeria, it’s not oil that is the leading sector of growth. It’s non-oil sectors. Agriculture, you know, retail trade.

You know, the creative industries and so on are really leading. And so that’s the story of Africa now. It’s a continent growing. It’s a continent with many possibilities. You know, one-third, according to an African Development Bank study, one-third of the population now is middle class.

So there’s a growing consumer class that is willing, ready and able to purchase goods. African countries are also wanting to transform their own products and sell. Not just export primary commodities. So there’s a whole change in mentality about investment. And the amount of investment coming into the continent now at $50 billion and plus is as much or bigger than aid now.

So the whole picture is changing. And I think people need to really switch their mentality to an Africa for investors. An Africa as a consumer market. An Africa with more skills than they ever thought. An Africa that has many more democracies functioning now. So both the political and economic story are finally coming together.

Does that mean that this Africa does not have problems? The answer is no. We have problems. We have problems with governance and corruption just as in many other parts of the world. But the issue is we need to build institutions to make sure that we don’t allow corruption to take hold. We need to be transparent in the way, like how we privatized the power market, in the way we do business. We need to do all of these things. And we need to keep moving in the right direction.

Jobs. We have a problem with unemployment across the continent just like it’s a big problem worldwide now. The quality of growth must be such that we create jobs for our young people in order to avoid problems down the line.

Forbes: That’s where you get the small businesses.

Okonjo-Iweala: That’s where the small businesses come. You’re absolutely right. And that’s why we need to solve their problems of access to finance, better infrastructure, power. So these are all the things. Infrastructure is a major problem on the continent.

But, you know, what I’m saying is now it’s very clear what our issues are. The final one is inclusion. We don’t have social safety nets. We need to think carefully on the continent. There are those who will never access the market. So what do you do? You need to invest in them. Education and better health so that they can become market participants in future.

And invest in them and in their children. These are the challenges. But I see them as opportunities. I see it as exciting. It’s homework. Real work that we have to do. And I’m one of the people who is pretty optimistic about the future of the continent.